PCM Continues M&A Tear, Buys Canadian Powerhouse For $12.5M

PCM notched its second massive acquisition of 2015, entering Canada by purchasing a $111 million managed services giant that specializes in cloud, staff augmentation and professional services.

The El Segundo, Calif.-based company, No. 29 on the CRN Solution Provider 500, said Edmonton, Alberta-based Acrodex, No. 92 on the CRN SP 500, has Microsoft's coveted Licensing Solution Provider (LSP) status, making it – like PCM – one of only a handful of North American Microsoft partners authorized to handle software volume licensing transactions.

"Acrodex is a super VAR," said Martin Wolf, president of Martinwolf M&A Advisors, of Walnut Creek, Calif., who advised Acrodex on the deal. "They are someone that sells services around the products they sell as well as professional and managed services."

[Related: CRN's Mergers and Acquisitions News Page]

Acrodex provides end-to-end infrastructure solutions focused on hardware such as PCs, servers, storage, network and printers as well as software asset management and services. The 445-employee company works most closely with Microsoft, HP, Cisco and VMware, servicing both government entities and private firms with more than 25 employees, according to the company's website.

"Acrodex's strong business fundamentals, experienced management and high concentration of services revenue is an attractive opportunity for PCM," PCM's president, Jay Miley, said in a statement. "We believe the operational efficiencies gained by combining Acrodex's footprint in Canada and PCM's extensive organization will drive deeper presence and scale in North America."

Acrodex is expected to be profitable in 2016, and builds upon PCM's April acquisition of Microsoft LSP superstar En Pointe, No. 42 on the 2014 CRN SP 500.

The deal will particularly aid customers with a presence in both the U.S. and Canada by allowing them to address all of their IT needs in one place, according to Frank Khulusi, PCM's chairman and CEO. This will be PCM's first time serving the Canadian market.

"PCM is transforming the company and wanted a bigger Canadian presence," Wolf said. "It is a very smart acquisition."

From Acrodex's standpoint, becoming part of PCM will provide the company with more capabilities and brand equity, a larger and stronger sales organization and more customer and vendor partnerships, Karim Amarshi, Acrodex's CEO, said in a statement.

Three-quarters of Acrodex's employee base has technical expertise, with many holding the highest-level certifications from leading vendors such as Microsoft, Cisco, HP, Dell and Lenovo, according to the company statement. Acrodex's technical strength is a key asset of the organization, enabling the company to provide managed services, cloud-based services, consulting and IT management support.

"I give Frank Khulusi a lot of credit," Wolf said. "He is transforming PCM from a traditional reseller into a solution provider with a much bigger platform."

Acrodex has a robust public sector practice, supporting the government of Alberta; its two largest cities, Edmonton and Calgary; and dozens of other ministries and municipalities across Canada, according to the company's website.

Organizations with more than 1,000 employees tend to leverage Acrodex for server management, network operations and custom-software services, according to the company's website, while businesses with less than 1,000 employees typically benefit from Acrodex's lifecycle management, mobile infrastructure, network implementation and server configuration services.

The Acrodex deal continues the massive consolidation seen in recent months among Microsoft's 15 or so LSPs, which once counted PCM, Acrodex and En Pointe among their ranks.

Sources told CRN last November that the Redmond, Wash.-based vendor was looking to reduce its number of U.S. LSPs from 15 to six by June 2015 as the company places a greater emphasis on cloud, mobility and services sales.

A different source concurred, saying in July that he expects the number of Microsoft LSPs to drop considerably over the next several years as a result of mergers and acquisitions.

Microsoft has been putting the squeeze on LSPs. CRN reported last November that the vendor was considering revoking CompuCom's LSP status because the solution provider wasn't meeting revenue targets or investing enough in technical certifications. That portion of the business was sold to SoftwareONE four months later.

CRN reported in July that SoftwareONE, No. 14 on the CRN SP 500, was in advanced, "very serious" talks to acquire the licensing business of Auburn, Wash.-based Zones, No. 30 on the CRN SP 500. Both SoftwareONE and Zones are Microsoft LSPs.

A source within Zones told CRN previously that Zones was among the list of LSPs that would struggle significantly to meet new Microsoft revenue targets, as the target was too big and the company faced too short a time frame to meet it organically. The company had previously discussed a partnership arrangement with SoftwareONE around its licensing business, the source said.

PCM was represented in its acquisition of Acrodex by Morgan, Lewis & Bockius, led by Bryan S. Gadol and Randy Wood.

PUBLISHED OCT. 28, 2015